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2014 (7) TMI 998 - HC - Income TaxExistence of partnership firm - Nature of the firm and legal consequences flowing from it - Intention to carry on business - Whether the firm was only a nominal entity - Held that:- The firm is brought into existence through a registered document and separate returns are field on behalf of the firm, posting profits and furnishing other ingredients of a typical return, one cannot expect the ITO to ignore the existence of the firm - as a result of dissolution of the firm, redistribution of the properties took place in a manner, different from the one, in which they were held before the constitution of the firm - the existence of firm is acknowledged, thus, the applicant cannot plead to the contrary – Decided against Assessee. Nature of property - Whether the immovable properties are capital asset or stock in trade of partnership – Held that:- The manner, in which the value of an asset, which forms part of stock in trade of a firm must be arrived at as explained in ALA Firm Versus Commissioner of Income-Tax [1991 (2) TMI 1 - SUPREME Court] the principle is that the value can be determined on the basis of cost or market value and the assessee will have option to choose between lesser of them, provided the business or trade is being continued; in case the firm is dissolved or the business activity is discontinued, the market value alone becomes relevant - whatever may have been the liberty of an assessee to choose between the cost and market value of an asset, whichever is beneficial to him; that liberty stands taken away when the firm is dissolved, or the business activity is discontinued - For the purpose of determining the value of property, which is allotted to the respective partners on dissolution, it is only the market value that becomes relevant; and that exactly was taken into account – Decided against Assessee.
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